One of the root causes of the blowup of the American Auto Manufacturing Industry has to do with the recent spate of horsepower wars.
For those of you unfamiliar with automotive history, we went through this exact same set of circumstances about 40 years ago. Like the Real Estate Bubble of 1989, history repeats itself in the auto business.
Historically, most automobiles were underpowered by today's standards. Comparing raw HP numbers is difficult, as the SAE (Society of Automotive Engineers) has changed rating standards over the years. In the old, old days, horsepower was calculated using formulas based on engine size and the like. Taxes, particularly in Europe, were assigned to cars based on horsepower, so manufacturers, particularly in Europe, had incentives to under-report horsepower. In America, however, where gas was cheap, and license and tax fees were not based on horsepower, there was little incentive to make smaller engines, or small engines with high specific output.
By the late 1930's, the "full-sized" American car had pretty much stabilized around a particular design, incorporating a riveted steel frame, a rear "live" axle with leaf springs, an inline six or eight cylinder engine (or flathead V-8), and a novel innovation, independent front suspension.
After the war, this design remained largely the same, with the only innovation being the development of the inexpensive overhead valve V-8. The "Smallblock Chevy", introduced in 1955, is by and large, still in production today, albeit largely upgraded.
And the basic layout of a "full-sized" mid-1950's car still exists today in the form of the SUV. I recently rented a Ford Excursion (they were out of minivans and this was considered an "upgrade"). Underneath the cheap plastic dashboard and boxy SUV styling lied the heart of a 1955 Ford Crown Victoria. Tellingly, the "SUV" did not even have four wheel drive.
The two cars are largely the same - a two-ton car with body-on-frame construction, solid "live" rear axle, automatic transmission with torque converter, dual control arm front suspension with coil springs, and a large, fuel-hungry V-8. Ford, at least has updated their engine line, dropping their 1950's era V-8's in the late 1990's (what took so long?).
Americans apparently like these kind of cars. Emissions and fuel economy rules for "trucks" were laxer than for cars, and hence the "lead sled" of 1955 morphed into the "Sport Utility Vehicle" of 1995 in response to regulatory changes.
Functionally, the Excursion was less useful than a minivan. Without four-wheel-drive, it was certainly not an off-road vehicle. In terms of interior room, it had LESS than the minivan I had hoped to rent. I ended up having to add a cargo box to the roof to haul the luggage of four people and two children. About the only useful aspect of the vehicle was its towing capacity, which is of interest only to boaters and RV'ers. And, as you might expect, the gas mileage was horrible.
This is the sort of vehicle that cause the demise of GM and Chrysler and the troubles at Ford. But another aspect of recent vehicle design also was responsible - the horsepower wars.
In the 1960's, little changed in car design, other than the "Lower, longer, wider" styling of the late 1950's and early 1960's. Engineers and marketing people discovered that horsepower was one thing that could sell cars. If you look at old ads from the 1930's and 1940's, you may see a car (such as a Buick "Straight 8") touted as "having good pickup" - an inference to its power. But actual horsepower numbers were usually not bandied about. Even heavy-duty over the road trucks had tiny engines by today's standards - often less than 200 HP and sometimes less than 100 HP, even in dumptrucks and the like.
In the late 1950's, V-8 power started selling, and as one of my old GMI professors liked to exclaim, "back then, even little old ladies would peel rubber at every stoplight". By the late 1960's, horsepower "came out of the closet" and pretty high numbers started to be bandied about. 250 HP, 300 HP, 350 HP, maybe even 400 HP. The "muscle car" and the "pony car" sold well and became part of popular culture - the subject of songs even (She's so fine my 409"). If you watch dealer training films from that era (Thanks, YouTube!) you can see how dealers were trained to sell horsepower to "this new breed of performance-conscious consumers".
But manufacturers were starting to get nervous. All that power in the hands of amateur drivers, tied to decades-old chassis designs and bias-ply tires could spell trouble - and did. Many folks thought that because they bought it, they knew how to drive it - and were wrong. Insurance rates for "muscle cars" skyrocketed. GM had mandates as to how much horsepower or displacement could be put into certain classes of cars (and clever engineers figured out ways around these mandates).
But what really killed the "muscle car" was the Arab oil embargo of 1973. The era of 35-cents-a-gallon gas came crashing to a close. Suddenly, 8-miles-per-gallon made no sense whatsoever. By the end of that decade, you'd be lucky to find any car from the "big three" breaking the 200 HP barrier. Even the mighty Corvette was strangled to 180 HP by 1979. Of course, the hard-core enthusiasts either hung on to their older 1960's muscle cars, or re-worked the low-compression engines of newer cars to put out more horsepower.
It was at this point, by the way, where the legend of 1960's muscle cars began. Since the cars of the 1970's were less powerful, heavier, and more inclined to rust (and fall apart), the cars of the 1960's were looked at as being superior and desirable in comparison. Unfortunately, many still cling to this notion that the primitive vehicles of the 1960's are somehow superior to the sports cars of today. They are not. The muscle cars of the 1960's were basically mid-sized or economy car chassis with truck engines tucked into them. The performance cars of today can out-accelerate and out-handle the best muscle cars of the 1960's - and are safer and easier to drive as well. Nostalgia is a fine and wonderful thing, but it should not trump reality.
At first, automakers fought the new restrictions. They sold large cars to consumers on the premise that "you won't be able to buy a full-sized car in a few years" - as though these turds of the mid-1970s would someday be rare collectibles. By the early 1980's, car makers figured out how to make cars with staggeringly high mileage ratings - even by today's standards. The tiny GM (Suzuki) Metro got nearly 50 mpg. The Chevy Chevette, with an Isuzu diesel engine, got an astounding 55 mpg. The Volkswagen Rabbit diesel got similar mileage. The secret to making a high gas mileage car is simple - small, lightweight car, small, low horsepower engine. It would take the automakers nearly three decades to re-discover this lost "art".
But by the mid-1980's something started to happen. The automakers stopped complaining about emissions rules and mileage mandates, and realized that it was cheaper to invest in Engineering than lobbying. With fuel injection and some sound Engineering, you could design and sell cars that had "good pickup" as well as rational fuel mileage. After experimenting with turbocharging four cylinder engines in its "SVO" Mustang, Ford went back to its 1955 playbook and re-introduced its small block V-8 as the "5.0" engine in its Mustang GT with over two-hundred horsepower, in a relatively small chassis. For car enthusiasts, it was a wake-up call that perhaps the long drought had ended.
And end it did! Through the 1990's and the early 2000's, horsepower steadily increased across all product lines. When I was at GM in the 1970's, we thought that perhaps we'd never again see the days of 200+ horsepower cars, and certainly not 300 or 400 HP models. We were wrong. Horsepower came back - with a vengeance.
By the mid 2000's it was possible to purchase, for not too much money, a car with over 300 horsepower under the hood. Chrysler dusted-off its 'Hemi" trademark (although not the same engine), while GM continued to tweak its venerable small block (now dubbed "Vortec") for more and more HP. Even the big block came back, in the larger pickups and SUVs. You didn't have to be a "motorhead" to own a high-powered car. All you needed was a checkbook.
But the horsepower wars were not limited to the sports car or muscle car set. All across product lines, horsepower increased. Toyota introduced a small V-6 into its now-venerable Camry line, largely for marketing purposes. The original 2.5 liter inline four provided more than enough power for this sedate sedan, even for passing and merging. But customers wanted a V-6 mostly because their neighbor had one (or didn't!) and because "more horsepower" was better. By then, gasoline was dropping in price, reaching a ridiculously low price of 87-cents-a-gallon in some States during the Clinton years.
As in the 1960's horsepower was a way of selling cars. The American automakers could not compete with the quality and sophistication of European or Japanese carmakers. But they could sell monster engines for cheap. If forced to sell a car on the same level as the imports, the U.S. Automakers knew they would get creamed. Between a Chevy Impala and Toyota Camry, it was no contest who was the winner. The Camry became the most popular selling car in America - displacing the Ford Taurus. Why? Simply because it was a far better car, that's all.
Many European manufacturers were slow to jump on the horsepower bandwagon. BMW, for example, had never been associated with high-horsepower street racing machines. Its elegant and sophisticated designs focused on handling and increased specific power from a small engine. Unlike American pushrod engines, which "redlined" at 4500 rpm, a BMW engine started making real power in that range - but unlike the Japanese motors, could be lugged down to 1,000 rpm if needed. Features such as variable valve timing which are just making their way into US cars today, were standard on BMWs 15 years ago.
In the 1980's and 1990's, no one would have dreamed about a 3-series with more than 200 horsepower, other than the special performance M-series. But by 2002, the standard inline BMW six had been bumped up to three liters and was cranking out over 200 HP. By 2006, with twin turbochargers, it was making 300 HP. V-8 engines were introduced into the regular (non-M type) product range making 400 HP. Horsepower was selling like mad in the US, and too late, BMW jumped on the bandwagon. In 2008, at the height of the $5-a-gallon gas crunch (and on the eve of the worst recession in history), BMW introduced a 400 HP, 8-mile-per-gallon, 6,000 lb "Sport Activity Coupe". Timing, as they say, is everything. It sold like lead balloons.
What happened in 2008 mirrored 1972. The price of gas shot up (mysteriously, it would seem, but actually, it was the increased demand from all those SUVs that caused it) to nearly twice what it had been previously. Suddenly, the idea of a 400 HP car or a 6,000 lb 10-mpg SUV seemed ridiculous. The "big-three" automakers, tooled up to make little else, started sliding toward bankruptcy. Their only "new" products in the pipeline at the time of their demise were re-introduced versions of their 1960's muscle cars. Talk about the wrong product at the wrong time! While these "retro" cars sold well at first, they tended to gravitate toward the trailer parks rather rapidly. Unlike their "real" 1960's counterparts, the retro Mustang, Challenger, and Camaro are relatively large, heavy cars, with tight, cramped interiors. They are sold on emotional value, not as practical cars. And without the big engine options, they are not really even fun to drive. A V-6 Mustang is a cramped, awkward car that handles poorly.
Meanwhile, Toyota and Honda and other foreign makes, which had never seriously jumped on the horsepower bandwagon, prospered. They still offered lower horsepower vehicles for sale in their home markets or as "base" engines in their US products. Making the switch in the product mix was not hard to do.
This is not to say they were totally prepared. On the eve of the gas crises, Toyota unwisely decided to "upgrade" its popular selling Tundra line of trucks, increasing the size dramatically, bumping displacement from 4.7 liters to 5.7 liters, offering a staggeringly low 4.30 rear end. The result was a truck that looked "big and mean" but got only 13 mpg. Nissan was saddled with a similar problem with its unfortunately named "Titan".
Both Toyota and Nissan were trying to copy American automakers, who in the late 1990's and 2000's had taken their most fuel-inefficient vehicles - trucks and SUVs, and made them larger, more menacing looking, and even less fuel-efficient, and sold them like crack. V-8 engines became standard, and the option of more efficient inline or V-6 engines were dropped entirely. Ford even put lift blocks in its trucks to make them artificially sit higher (and more prone to rollover) simply for aesthetic purposes (Ford offered a "lowering kit" at dealers for frustrated 5th wheel owners who found the trucks could not tow their trailers due to the height).
Americans who bought these monster trucks and SUVs saw their values plummet. You could not give these beasts away, and keeping them was an expensive proposition, as they cost hundreds of dollars to fill the tanks. Suddenly, no one wanted a monster truck anymore. $5 a gallon was the pain point for Americans when it came to gas hog cars. And even when prices dropped back down, well, people have long memories!
So, now we are in a new era, on the eve of the first new decade of the 21st Century. And what have we learned? How much horsepower do you really need? How much car do you really need?
The lesson people are taking away from 2008 is that even if gas prices drop precipitously, it makes no sense to go out and buy a gas-hog. As the price of gas is not within your control, you will be at the mercy of the oil companies if you own a gas hog - and they decide to raise prices.
So how much horsepower do you really need? You certainly don't need 400 HP or even 300 HP. Many over-the-road 18-wheelers have engines in this class - and they are pulling tens of thousands of pounds of truck and cargo around.
The answer, of course lies in your needs. For commercial trucks, cargo or trailer weight may be the determining factor. But for the rest of us, we can make due with a lot less. Even for those towing a trailer, the idea that "more horsepower is better" is not necessarily true. My 1995 Ford pickup (relatively small and low-to-the-ground compared to today's monsters) has little more than 200 horsepower, but is rated to tow a staggering 8,000 lbs. Tow capacity is a function more of braking ability and chassis dynamics than horsepower. And yet, it towed a trailer over the Rockies. Not very fast, but it got the job done. Spending more money on horsepower so you can "speed up the hills" makes little sense, but it is what they advertise in the RV magazines.
For passenger vehicles, horsepower needs are even less. Many folks wrongly assume that they "need" a V-6 in a midsized sedan. But other than for acceleration, most cars do not "need" much horsepower to cruise around. The base four-cylinder Camry engine still provides more than adequate passing and merging acceleration, and costs less to own, is easier to maintain (far easier) and uses much less gas. The V-6 option on the Camry adds an additional staggering 100 HP to the car. Do you really "need" that in a sedan used to go to work or fetch groceries?
When shopping for a car, check out the engine options in the lineup. Many makers offer a "base" engine that is usually more fuel efficient than the optional engine. Ask yourself whether you really need that horsepower. And ignore salesman's arguments that a larger engine will "help resale value". If you are smart about car buying, you plan on keeping the car for a decade or more. And as experience has shown, the resale value on gas-guzzlers drops during a gas "crises".
I believe that miles-per-gallon is going to be the new horsepower of the next decade. Just as in the late 1970's and early 1980's we over-reacted to gas crises, we will do the same thing for the next few years, even as gas prices drop. People remember getting stung in the wallet, and since buying a car can be a decision that affects your life for a decade or more, people will be reluctant to sign on for another gas-guzzler soon. Of course, buying a higher-gas-mileage car decreases demand for fuel, further driving the price of gas downward.
Note that I am not advocating that you buy a super-mileage car, such as a hybrid. Those are nice cars, and the high mileage they produce helps everyone by dropping demand (Ironically, many Prius drivers never get their fabled 45 mpg, as they maintain bad driving habits). The additional cost of a hybrid drivetrain, even with tax incentives, often does not pay back over time.
And as the math shows, the savings in going from 30 to 40 miles per gallon is not the same as going from 20 to 30 miles per gallon. In fact, it is only half. The law of dimishing returns applies to gas mileage. The big savings in fuel occur when you dump a 10 mpg car for a 20 mpg car - and they are far easier to achieve.
My basic rule of thumb is that you should look for a "reasonably" efficient vehicle. A truck should be capable of getting 20 mpg combined city and highway. A car should be able to get close to 30 mpg. It is not hard to do, either, and you need not drive some tiny speck of a car with no acceleration. My BMW X5, with "base" engine and 5-speed regularly exceeds 20 mpg (and could do even better without full-time four-wheel-drive). My aging 3-series regularly returns 29 mpg with its older 2.8 liter engine (180 HP). Neither could be said to be "slow" cars.
We are already seeing the automakers scramble to meet mileage demands, and it is likely that Congress will push for higher gas mileage standards. While complaining that such standards are hard to meet, GM almost immediately was able to up its gas mileage range simply by pushing its smaller engines. They started pushing the base 4-cylinder models over the more profitable V-6's. Suddenly, GM's ad campaigns switched from horsepower to gas mileage, overnight. Ford stayed in business, thanks largely to its nearly 30 mpg Ford Fusion, and its nearly 40 mpg hybrid version.
Of course, this will all fade from people's memories in about 15-20 years. That's how long it took us to "forget" the gas crises of 1979 (remember even and odd gas days? I do!) and about how long it took us to "forget" the Real Estate bubble of 1989. Human memory, it seems, does not survive a generation.